One thing the author gets right is that it's not necessarily about being brilliant but being able to work in the context of the team. And this defines the promotion ladder. This is the build trust thing. It's not specifically innovative and it leaves a lot on the table (which is why people leave.. to have a bigger impact).. but after you reach the "bar" so to speak then you will have more higher level work then you can handle.
How long did it take you to get promoted back to your level ?
Isn't that clear by now? People want to get into the most famous companies. They think that by osmosis they'll be better engineers themselves, it looks good on the resume, they may be exposed to some brilliance, and, surely, once they're there, these companies will recognize their mistake and promote them into their rightful position. Not to mention that it's notoriously hard for people to self-assess their level, also because the coding gods of one company can be the low performers for another company. And personally, I have no reason to believe that Amazon, Facebook, Google or Microsoft are necessarily on either one far end of that spectrum.
Also its a tad little foolish to throw away money for designation, in your 20s when you can save up and use that money for retirement later. Especially given the fact that SDE1 and SDE3 have to both write the same code.
It does seem like standard policy among tech companies though. I came to the US to work for Microsoft (I'm no longer there) as a level 59 (lowest SDE level), despite having almost 6 years of experience at that point. My wife (an SDET) had even more experience than me (she was a Senior SDET before we moved here) and when she got a job her company did the same thing.